The Relationship Between Accounts Receivable Growth and Stock Price Trends: Evidence from U.S. Public Companies within 5 Years

Qinchen Zhu

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.FINANCE

Faculty Research Mentor: Yan, Claire  

Abstract:

When companies engage in credit sales, an increase in accounts receivable levels can be regarded as a signal of weakened liquidity and operating performance, as it delays cash collection and may discourage investors from investing. Previous studies suggest that increases in accounts receivable reflect higher operational risk. However, the specific relationship between accounts receivable and stock prices remains unclear. This study explores the impact of increasing accounts receivable on stock prices, focusing on the proportion of accounts receivable relative to sales or service revenue and its relationship with stock price trends.This study applies quantitative and comparative analyses to financial data from eight publicly listed companies over five years period, focusing on accounts receivable and sales or service revenue. The sample includes four companies with relatively stable accounts receivable-to-revenue ratios and four companies exhibiting increasing ratios. The study compares the two groups, emphasizing differences in stock price performance, and uses visualization to highlight trends and patterns in the data.The findings are expected to reveal a negative relationship between accounts receivable levels and stock prices, suggesting that increasing accounts receivable may signal declining investor confidence in a company’s performance and liquidity. These insights could help companies optimize their credit sales and receivables management policies.